“US residents who do not disclose information about accounts they hold in Israel could risk fines of up to 50% of the balances in the accounts. They are also exposed to the possibility of criminal investigations and charges,” Adv. Barbara Kaplan, a former senior district attorney for the IRS, told “Globes.” Today, Kaplan is chair of the New York tax practice at Greenberg Traurig, which has offices in Israel as well.

According to Kaplan, the sanctions do not end at fines for customers. Financial institutions, primarily banks that do not report accounts, may also be penalized. “Financial institutions, such as banks, hedge funds, and mutual funds that do not report in the requisite manner, may be fined 30% of assets.”

Israel is not the first country to sign such an agreement with the US. Canada, the UK, Italy, Ireland, and Mexico have already signed similar agreements. According to Kaplan, it is too soon to assess whether these agreements are effective at improving the countries’ taxation capabilities, but she believes they will be effective.

“I believe the agreements will yield results,” says Kaplan, “The reason being that the countries that signed them, and the financial institutions in those countries, took upon themselves significant financial obligations, and they are aware of the high fines for violations.”

Do these agreements, in fact, work both ways? In other words, does the US provide information about its residents to the same degree?

“The agreement is not automatically reciprocal. Each agreement with each country has different terms, from which the degree of reciprocity may be inferred. Certain countries are faced with many political pressures to sign the agreement, even if it is not entirely reciprocal.”

The signing of this agreement is based on the Foreign Account Tax Compliance Act (FATCA), which is expected to go into effect in two months. According to the act, it is the responsibility of each and every financial institution in the world to make sure that its American customers have reported their assets held by the institution to US authorities, in accordance with US law, or it will be faced with sanctions and heavy fines.

Kaplan points out that though the draconian measures will soon go into effect, the government will not be very hard on the banks. “The US Treasury has committed to two years of relatively light enforcement, so long as the banks make a sincere effort to comply. Banks that have prepared their systems for implementation of the regulations are not expected to pay fines, at least until 2016